End-point royalties on seed may become reality

A plan to update Canada’s plant breeders’ rights laws could potentially cost grain farmers tens of million of dollars per year through a new system known as end-point royalties.

End-point royalties (EPRs) are charged on harvested grain.

In countries where they exist, the royalties generally range from $1 to $3 per tonne, although rates can be set at any level.

In Australia, where EPRs have been in place for several years, EPR rates vary from variety to variety and are set by companies that develop new seed varieties and successfully apply for plant breeders’ rights protection.

The royalties are normally paid by producers on harvested grain at the point of delivery.

In most cases, the system requires that producers declare the variety of grain they are selling.

If an EPR is in effect on that variety, the grain buyer deducts the royalties that are due and submits the money to the seed company or its agent.

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Seed companies are not required to charge end point royalties on PBR protected varieties, but it is widely expected that they will if Canada up-dates its plant breeders’ rights legislation to conform with UPOV 91 provisions.

Last year, federal agriculture minister Gerry Ritz signaled to the Canadian grain industry that Ottawa is considering ratifying UPOV 91 and updating Canadian legislation.

Ritz said updated PBR legislation that allows for the collection of end point royalties could be enacted before Aug. 1, 2014. If that happens, end point royalties could be imposed on any new varieties that are registered after Aug. 1, 2014, and covered by plant breeders’ rights.

EPRs have been discussed this winter at grain industry meetings.

Supporters see them as a way to ensure that seed companies and de-velopers of new seed varieties can generate greater returns from their plant breeding investments.

However, others view EPRs as yet another attempt to increase the amount that farmers pay for access to new seed varieties.

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If UPOV 91 is ratified by Ottawa, EPRs could not be applied retroactively to varieties that have already been granted PBR protection.

Nor would UPOV 91 eliminate a farmer’s right to save harvested grain and plant farm-saved seed. However, what often isn’t made clear is that end point royalties could be collected.

Stuart Garven, a Saskatoon-based consultant who has examined funding issues affecting cereal breeding, said EPRs are viewed by many as a mechanism that could help build a sustainable funding environment for cereal breeding, particularly as Ottawa scales back investments in cereal breeding programs.

“We’ve had an incredible 100-year history of public breeding in wheat and barley in Canada, but the reductions in (government) spending are jeopardizing the success of that program,” said Garven.

He also acknowledged that the concept of charging royalties on harvested grain is new to many Canadian producers.

“The changes (being proposed to cereal breeding funding) are complex,” Garven said. “We’re in transition to something new and no one really knows exactly what … it’s shape is going to look like 10 years from now.”

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Terry Boehm, past president of the National Farmers Union, said UPOV 91 would result in increased costs for farmers and more stringent controls on what farmers can do with farm-saved seed.

Also by this author

Amendments to Canada’s Plant Breeders’ Rights Act, as included in Bill C-18, the Agricultural Growth Act, will not put in place end point royalties on implementation. Bill C-18 says that the breeder can be compensated on harvested material if the breeder can prove that propagating material (seed) the protected variety was obtained illegally.
If the Plant Breeders’ Rights Act was to be used to facilitate end point royalties or any other system, new regulations would have to be developed. The regulatory process requires development of rationale for the regulations, including an impact assessment. The process also requires public consultations before regulations can be implemented.

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Ed WhiteEd White has specialized in markets coverage since 2001 and has achieved the Derivatives Market Specialist (DMS) designation with the Canadian Securities Institute.

Robert Arnason reports on all aspects of agriculture but focuses on sustainable farming and consumer expectations around food production.

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